Friday, March 7, 2014

Sensex - Is the up move a fool’s rally?

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In today’s morning equity report “The Financial Wave short term update” we published the following in addition to in depth analysis using momentum indicators, Elliott wave counts, etc-
We have been expecting start of next Bull trend in 2014 and has highlighted it in all of 2013 but looking at the short Elliott wave patterns and structure we have our doubts if this can be it and one final leg on downside is pending before the Bull run can start. The up move from 5980 has been corrected everytime by mere 1 day of fall which is a typical characteristic of a corrective pattern where corrections take lesser time than preceding waves. Also last 100 points of up move on Nifty has already created lot of euphoria by moving a few selective stocks up by anywhere between 5% to 8%. Bull Trend does not start with lot of euphoric rise but should be more subtle and in disguise and accompanied by strong accumulation which should be reflected in volumes which is not visible so far.
The following is published in this month’s issue of “The Financial Waves Monthly update” which forecasts medium to long term trends on Sensex, Gold, ForexBITCOINS, and lot more in its 16 pages of comprehensive report.
Sensex weekly chart is showing a very important channel which is working since 2010 onwards. The lower trendline of this channel has provided strong resistance to prices everytime index has approached near it. We can clearly see that since 2013 onwards prices are simply clinging to thistrendline and drifting higher. As long as prices do not enter in between the channel shown above the move can remain subdued and slow.
Figure 2: Sensex weekly chart

There are times when the wave structure become very complex and we have to combine it with other techniques like Time cycle, Breadth indicators, Moving average differences, etc.
Price Oscillator indicator: We are showing a Price oscillator indicator on the weekly chart. This simple Oscillator takes difference of 2 Moving averages and plots it. We think difference of Moving average provides much vial information than the single average itself. The reason being difference of average is a true indication of momentum. It measures market momentum over short term as compared to medium or long term. In the above chart we are using 20 days and 5 days Exponential Moving average. The indicator clearly reflects that momentum has been actually slowing down since October 2012. The high hit in October 2012 by the indicator is still not taken out and each of the high is on lower value. This means that the shorter moving average is not able to move away from longer Moving average giving which cannot start a strong trend on upside. Even currently the indicator is lying near value of 1 when the index is reaching near another high.
In a nutshell, …………….. The probable turning point for this move is near ……… levels and the reason why we are changing this value is based on the fact that the resistance trendlineconnecting the tops is slightly tilted on upside and with each passing month the resistance is slowly shifting upwards. A very strong ……….
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